What is guaranteed auto protection (GAP insurance)
Guaranteed auto protection (GAP) is insurance upon purchase of a vehicle that covers the gap between an auto loan and what insurance would pay if the vehicle is stolen, totaled, or damages beyond what’s covered. This is typically an add-on to auto insurance and is rarely required from loan lenders. Guaranteed auto protection coverage is a supplement to comprehensive or collision auto insurance, but it is not a replacement.
Lenders usually require buyers to purchase collision and comprehensive coverage when purchasing a new vehicle. These cover average happenstances like damages done to the vehicle from hitting something, fires caused by damages, or theft. It’s important to know the vehicle’s value when determining if GAP insurance is the way to go.
Purchasing GAP insurance
The general rule of thumb when purchasing GAP insurance is that if the amount of money left to pay on the loan is lower than the value of the car, it is not necessary. Moreover, if you don’t have a loan or a lease, GAP insurance is something you can skip. Nickerson Insurance Systems, Inc. can help you decide whether it’s right for you.
When GAP insurance comes into play
If you’ve been involved in an accident that leaves your vehicle totaled beyond repair or it has been stolen and not going to be found, GAP insurance may come into play. If the amount of money owed on the loan is higher than the value of the total loss, then GAP will help. It will cover the amount still owed on the loan beyond what the vehicle is worth so you only have to pay the insurance deductible. This will help speed along the purchase of a new vehicle and not leave the vehicle owner with having to be completely out of pocket to pay out the remainder of the loan.
Let’s give a real world example of how this would work. Person A has only collision and comprehensive insurance and owns their car and crashes into Person B who has both collision and comprehensive insurance alongside GAP insurance with a lease and both cars are totaled. Person A is at fault and will have to cover the damages to Person B who will have to pay their own deductible and whatever is still owed on the loan beyond what the car’s estimated value is. Had Person B not had GAP insurance on their loan it would have to be paid out-of-pocket beyond what insurance would cover. So, it is something people who opt to lease or take out loans should consider.
Guaranteed auto protection is also something that would add to monthly premiums and last the duration of the vehicle loan, so reviewing your budget and making sure the cost does not outweigh the benefits is something that interested parties should evaluate. Again, GAP insurance is an optional item and not necessary for every auto owner.
If you’re interested in guaranteed auto insurance – Nickerson Insurance Systems, Inc. can get you covered
We can walk you through how GAP insurance works and see if it’s right for you. If GAP isn’t right for you, we can walk you through different options of auto insurance with our staff experts.